WASHINGTON, Nov. 16, 2017 /PRNewswire/ -- Health systems
can no longer take as a given their growth as community health
providers. So how can these organizations ensure that they can
continue to serve their mission amid consolidation and heightened
competition from traditional and nontraditional players?
"The numbers do not lie: We are seeing growth calcification in
markets across the country," said Tom
Cassels, National Partner, Consulting at Advisory Board.
"And while consolidation is yielding bigger balance sheets, size is
simply not translating to organic growth. Health systems that want
to grow faster than the market must focus on getting chosen by
their most important customers—patients, physicians, and
employers."
In many geographic areas, there is scarcely any difference
between the growth rate for the fastest and slowest health systems,
often restricted between 1.5% and 2.5% annually.1 "To
break through the widespread limits on growth, health system
strategies should account for the increasing migration to
outpatient care, fragmentation of the healthcare provider market,
rising payer scrutiny on value, and a policy push toward individual
choice," said Zachary Hafner,
National Partner, Consulting at Advisory Board. "Growth is
essential to creating sustainable margin to reinvest in health
systems' mission of providing the highest quality of service and
patient outcomes."
Trends Call for New Growth Strategies
Data show the
complex challenges that hospitals and health systems face:
- Utilization shrinks: Inpatient days per 1,000 people in a
patient population have fallen by 8% since 2009.2
- Prices recede: From January 2013
to January 2015, hospital price
growth dropped from 2.9% to -0.1%.3
- Patients do not value loyalty: Hospitals and health systems are
seeking to build durable patient loyalty and yet almost four out of
five Medicare patients use more than one system for care across
five years, according to Advisory Board analysis of a subset of
claims, and the majority of Medicare patients use two to five
health systems.
- M&A is no silver bullet: Two years after acquisition, 59%
of acquired hospitals fail to achieve increases in market share or
grow as fast as market peers.4
- Physicians continue to refer outside the system: For an average
hospital, employed physicians refer $52
million in business outside the health system.5
While almost 3,200 individual hospitals are now part of health
systems, a 20% increase since 2004, physicians have not been wowed
by the benefits of increased consolidation.6 Today, 38%
of physicians are employed by hospitals but one third of employed
primary care physicians refer out-of-network for specialty
care.7,8
- Consumer-directed market grows: Amid this combination of
trends, an estimated market of $700
billion has emerged for shoppable procedures across
inpatient and outpatient care.9
Driving Consumer-Centric Growth
Facing a more
consumer-driven market, health systems can build on three
principles, said Brian Fuller,
National Partner, Consulting at Advisory Board. "Best practices
center on knowing your customers, designing around the patient
journey, and marketing to inflect key decisions," he said. "Health
system marketing should create consumer value by focusing on
driving specific activity within key segments of the patient
journey. This outreach is strengthened by specific calls to action
and continuous testing and refinement."
Knowing their customers means health systems need to identify
the behaviors and decision-drivers that influence the decisions
customers make, said Kyle Rose,
Executive Director, Technology at Advisory Board. In particular, he
emphasized the power of advanced longitudinal patient data to
transform growth, enabling new strategic views into care journeys,
care pathways, and lifetime value of health care customers. "Health
system growth now depends on understanding consumers better than
competitors do, and not just for planning and targeting services
and facilities," Rose said.
Srinivas Sridhara, PhD, Managing
Director, Data Science and Analytics at Advisory Board, elaborated:
"Being chosen by patients requires studying key inflection points
and journeys of consumer segments. Health systems should understand
how patients make care decisions and what that says about the
strength of physician and consumer relationships, what kind of
physician network is needed, network integrity strategy, and health
systems' ability to reach out to consumers about services. This
requires a new generation of data and analytics that provides
a 360-degree view of how patient journeys and care pathways
interact with different parts of our health system."
For example, understanding customer journeys includes
nonemergency visits to retail health or walk-in sick clinics or
telehealth that can include online visits or videoconferencing with
a doctor or nurse. One health system working with Advisory Board
found that for every 100 consumers considering the health system's
services, only 40 received care and said they were likely to return
for future care. Along the journey, 24 dropped off due to lack of
online information, such as consumer reviews, services offered, and
locations. Four more consumers ended their journey because they
could not schedule an online visit or access telehealth. Finally,
32 consumers who received care were unlikely to return because they
did not find the right level of staff friendliness or care
specialization.
"These and other data on consumer journeys can lead health
systems to a new level of service and organic growth beyond
merger-driven expansion," said Leslie
Schreiber, Managing Director, Consulting at Advisory Board.
"Instead of following a competitor-centric strategy, health systems
can raise growth by adopting consumer-centric strategies and
redefining success to delivering the maximum consumer value and
developing lifetime loyalty."
Adopt Innovator's Mindset
Health system strategy
requires no less of a transformation. Typically, health systems
design for broad market appeal to maximize their chances for return
on investment, for example building a retail clinic near a
corporate complex or a hospital-branded outpatient surgery center,
said Shay Pratt, Executive Director,
Research at Advisory Board.
"Competition now requires health systems to think more like
innovators. They should make deliberate choices to actively attract
and compete for specific customer segments and then differentiate
services to compete for choice," Mr. Pratt added.
Marietta Memorial Enacts Market-Driven Planning
As an
example of a progressive institution making strategic decisions
based on consumer insights, Marietta (Ohio) Memorial Hospital engaged Advisory Board
on developing a new strategic service line. A market analysis
determined that market demand would not support investing
$2 million in new equipment for the
advanced surgery within the service line. The hospital did not
invest in the large technology and scoped their new program to the
market need.
Gain the Full View of Growth Opportunities
Advisory
Board leverages the largest all-payer claims database in the U.S.
to understand referral patterns and has made a multimillion-dollar
investment in more than 100 million records of longitudinal data,
allowing members to explore where patients go when they are not
with a given health system. Advisory Board's platform enables
health systems to use these data alongside consumer information and
all-payer market intelligence to make targeted decisions to
prioritize investments for growth.
National Experts on Health System Growth and
Design
Advisory Board's team of National Partners on health
system growth and design includes experts on these topics for
hospitals and health systems:
Zachary
Hafner, MBA: All aspects of health system growth
strategy including value transformation, strategic partnerships,
ambulatory strategy, consumer strategy, payment innovation
(including Medicare Advantage), and mergers and acquisition
Tom Cassels, MPP: Corporate
strategy, transaction advisory services, product innovation and
design, digital strategy, payer strategy, and strategic pricing
Brian Fuller, MBA: Enterprise
health system strategy, health system rationalization, strategic
partnership evaluation and transaction advisory, consumer and
service line strategy
Ron Charpentier, MBA, National
Partner: Health system strategy, Academic Medical Center
strategy and care delivery transformation, care delivery network
strategy and optimization, physician enterprise integration and
optimization, health system margin performance, care delivery
network strategy and optimization
Beyond the National Partners, other Advisory Board experts on
health system growth and design include:
Christopher Kerns, Executive Director,
Research: Health system strategy and finance, performance
improvement, academic medical centers, and children's hospitals
Shay Pratt, Executive Director,
Research: Health system strategy, volume growth, market trends,
imaging, and service lines
Kyle Rose, Executive Director,
Technology: Strategic planning, business development, and
data-driven growth
Rob Lazerow, Managing Director,
Research: Major industry trends, payment transformation,
accountable care strategy, and health system strategy
Ben Umansky, Managing Director,
Research: Health system strategy, partnerships and
affiliations, building systemness for health systems, the economics
of emerging payment models, changes in insurance markets, and the
business case for consumer-oriented care.
Alicia Daugherty, Managing
Director, Research: Health system strategy, planning, and
marketing
Leslie Schreiber, Managing
Director, Consulting: Consumer-driven growth strategy, price
transparency, strategic pricing, ambulatory strategy, digital
strategy, customer relationship management (CRM), and customer
experience optimization
Srinivas Sridhara, PhD, MHS,
Managing Director, Data Science and Analytics: Advanced
analytics, business intelligence, market trends, health system
strategy and planning, health policy, quality, and performance
improvement
Hollie Freeman, Managing
Director, Technology: Consumer engagement platforms, patient
experience, staff engagement, transparency, and organizational
accountability
Brian McCartie, Practice Partner,
Consulting: Strategies for health systems to align with active
medical staff; health system assessment of the best alignment
methodology, whether through employment or a combination of
collaboration models including employment, clinical integration,
comanagement, and physician services agreements that ensure a
healthy bottom line for integrated health systems
Notes on sources:
1 Estimate
from Advisory Board based on interviews and analysis.
2 Altarum Institute, Health Sector Trend Report,
March 2015, accessed April 2015; American Hospital Association Annual
Survey Data; US Census Bureau: National and State Population
Estimates, available at:
www.census.gov/popest/data/state/totals/2013/index.html.
3 MedPac 2014, Chapter 3 Hospital Inpatient and
Outpatient Services; Analysis of American Hospital Association
Annual Survey data, 2014, for community hospitals.
4 Strategy&, Succeeding in Hospital & Health
Systems M&A, accessed November
2017, available at
https://www.strategyand.pwc.com/media/file/Strategyand_Succeeding-in-Hospital-and-Health-Systems-MA.pdf.
5 Analysis of hospital cohort using referral management
technology from Advisory Board.
6 American Hospital Association, AHA Hospital
Statistics, 2017 Edition, accessed November 2017, available at
http://www.aha.org/products-services/aha-hospital-statistics.shtml.
7 HealthLeaders Media, "Number of
Hospital-Employed Physicians Up 50% since 2012," September 8, 2016.
8 Analysis of hospital cohort using referral management
technology from Advisory Board.
9 Estimate from Advisory Board based on interviews
and analysis of total hospital revenue, inpatient, outpatient,
excluding ED and all ED admissions related revenue.
About Advisory Board
Advisory Board is a best
practices firm that uses a combination of research, technology, and
consulting to improve the performance of 4,600+ health care
organizations. As the health care business of The Advisory Board
Company (NASDAQ: ABCO), Advisory Board forges and finds the best
new ideas and proven practices from its network of thousands of
leaders, then customizes and hardwires them into every level of
member organizations, creating enduring value. For more
information, visit www.advisory.com.
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